China’s Outward Direct Investment in the United States: From the perspective of agglomeration economies

Abstract

Over most of the last two decades, China’s Outward Direct Investment (CODI) has reshaped the global economic landscape and attracted considerable attention. Although extensive research shows that CODI features agglomeration, there is limited research from the perspective of different patterns of agglomeration economies at the subnational level. It is unclear which patterns of agglomeration economies play a role in the location choice of CODI, especially with the variations of CODI in terms of entry mode and ownership. Therefore, based on the data of the CODI in the United States in the period 2000–2016, we use a conditional logit model to investigate the influence of specialized and diversified agglomeration of local firms as well as industry-specific and industry-diverse agglomeration of Chinese investors on the location choice of CODI, and further explore the heterogeneous influence concerning the entry mode and ownership. Our results show that among a variety of agglomeration economies, the specialized agglomeration of local firms is the premier factor influencing the location choice of CODI, even exceeding the influence of industry-specific agglomeration of CODI in the same industry. Industry-diverse agglomeration of CODI plays a weak role, while diversified agglomeration of local firms has no effect. Moreover, the location choice of acquisition is more sensitive to the specialized agglomeration of local firms than that of greenfield investment, and the influence of the industry-diverse agglomeration of CODI has no effect on the location choice of acquisition. In terms of the ownership, the location choice of state-owned enterprises (SOEs) is more sensitive to the specialized agglomeration of local firms and industry-specific agglomeration of CODI than that of private investment, and the industry-diverse agglomeration of CODI has no significant impact on the location choice of SOEs’ offshoring subsidiaries.